B&Q and Screwfix owner Kingfisher and Wickes owner Travis Perkins rallied on Friday as investors bet that disruption at Homebase would benefit the two after Australia's Wesfarmers sold Homebase for £1.
Australian conglomerate Wesfarmers, which paid £340m for Homebase just two years ago, sold the UK DIY chain to restructuring specialist Hilco Capital. Hilco will revert the 24 Homebase stores trading under the Bunnings name across the UK to their original trading name following the disposal, which is expected to cost up to £230m.

Jefferies said in a note that the sale will have "major consequences" for UK DIY.

"The risk was for sharply increased capex in the years ahead. We should now get a sharply improved gross margin outlook. This is materially supportive to B&Q, and Kingfisher," it said. It said the risk ahead of today was that Wesfarmers would be "irrational" and back a significant investment to rebrand Homebase stores into Bunnings.

"Today's news should see B&Q's biggest competitor (and arguably the only alternative to retail customers in the UK large-sheds DIY market, given Wickes' squarely more trade oriented offering) become much more sensitive to short, and mid-term, margin and cash flow challenges."

Jefferies said Homebase will miss the "considerable buying muscle" of Bunnings in Asia, meaning pricing on seasonal products including barbecues is likely to be less aggressive as a result.

"A number of branded suppliers had strongly backed BUKI in a bid to create an alternative to B&Q in the UK, and that support is likely to soften under the new ownership structure," it added.

At 1225 BST, Kingfisher shares were up 3.5% to 307.20p and Travis Perkins was up 2.1% to 1,367.50p.

Related share prices
Kingfisher (KGF) share price
Travis Perkins (TPK) share price